Earning extra cash from a side business can be a great way to quickly improve your finances – and get the job of your choosing done. Depending on your time availability and the side appearance you choose, this can be quite lucrative too: According to a study by SunTrust Bank, the average Millennial reports make nearly $ 1,000 a month with their side appearances. That is some additional money that can be used well. Here’s how to formulate a plan for your extra income.
When you start a side gig, you’ll have to work more hours and rearrange your schedule to take on the extra work. Obviously, this can affect your ability to enjoy leisure activities, spend time with friends and family, and your energy levels.
Calvin Williams Jr., CEO and founder of Freeman Capital, suggests that the first step in creating a plan is to evaluate the type of lifestyle you want.
“Every sideline requires a different level of commitment. Would you like that lifestyle change? The first step is to genuinely assess the quality of life you want and see if your sideline is compatible with it.”
Williams recommends considering a variety of side gigs as each can require different efforts and rewards that are more or less consistent with your income priorities and lifestyle. A side gig that requires too much effort can lead to early burn-out if, for example, the rewards aren’t appropriate.
The next major priority to sort out, Williams says, is why you want the extra cash.
“Are you just looking for more cash flow or trying to increase your net worth, such as to pay off debt or build savings? By answering these questions you can move closer to the next steps.”
Invest in yourself
The extra income you generate is best used as an investment in yourself in three main ways: by improving your net worth, improving your employability, or increasing your income over the long term. If you have debts – especially high-interest debt like credit cards – Williams suggests addressing those first.
TheNo. 1 way to invest in yourself is to get a grip on your debt. Consider these two important tips: First, consider the snowball method by starting with paying off the smallest of debts and building from there Or try the debt avalanche. Pay off high-yield debt first. Either way, the goal is to use your side performance to quickly gain control of your debt. “
You can also think of your side gig as a way to make yourself more employable. Depending on your appearance, you can acquire new skills that are transferable to traditional jobs or your existing 9-5, such as: B. Learning how to market your company or use new technologies. In other cases, a side gig can provide the money to purchase new credentials.
“You can use secondary employment income to create greater value for your family: What certifications or other training can you obtain to help you with your 9-5 W2 job? Invest yourself or get certificates and increase your primary career income, “says Williams.
More of Invest in you:
The ultimate side guide for 2021
How to start a sideline during the coronavirus
5 Freelance Jobs That Can Make $ 100,000 Or More During The Pandemic
Don’t forget about the benefits of your 9-5 job once your site is up and running. Now that you have more income, increase your 401,000 contributions – to the maximum if possible, and certainly at least to the amount necessary to receive a full employer match. You can also use the HSA or FSA contributions, as these also reduce your AGI for tax purposes. Solid health, AD&D, and life insurance can protect you more completely if you can now afford to contribute to better plans thanks to your extra income.
Finally, Williams suggests using your additional income stream to produce assets that can generate income for you – that is, convert that new cash flow into assets. This can mean anything from opening a brokerage account to investing in real estate or loan platforms. The idea is to make sure that your extra income is generating money for you in the long run. Williams suggests this is especially important for families with color who have historically had less wealth and fewer opportunities to create wealth.
“There is a racial gap in this country in terms of wealth and income inequality. Personally, I believe that running a side business can help colored families build wealth to fill that gap.”
Finally, remember that a side business is real business and should be treated as such. For example, to simplify the tax time, you should keep a separate bank account for your additional income. If you use a phone for your business, or there are gasoline and mileage costs for your vehicle, these costs can be deducted as business expenses. The same goes for a home office. As your overall income and net worth grow, it may be time to get a professional accounting or financial advisory service to help you make the best decisions possible, Williams suggests.
“Treat your side gig like a real business and invest in the things that make it grow.”